PH CEOs pessimistic over tax environment

Business executives in the Philippines along with Myanmar are among the most pessimistic about the domestic tax environment, findings of the Business Barometer: OBG in Asean CEO Survey show.

The highlights of the survey, contained in OBG’s Editors’ Blog, did not discuss this finding in detail but the survey was done in 2017 just as the Philippines was about to implement its tax reforms.

Philippine executives join five Asean members optimistic of business prospects.

Around 84 percent of executives surveyed across six Asean states – Indonesia, Malaysia, Myanmar, the Philippines, Thailand and Vietnam – had positive or very positive expectations for local business conditions in the coming 12 months, while 72 percent were likely or very likely to make a significant capital investment

The survey covered over 550 C-suite executives from Indonesia, Malaysia, Myanmar, the Philippines, Thailand and Vietnam a wide-ranging series of questions in face-to-face meetings. Significantly, by collating a collective sample, the team was able to gauge and analyse regional investor confidence, while also noting varying national perceptions within the bloc.

The largest national sample came from Indonesia, followed by the Philippines, Myanmar and Thailand, while the smallest samples were taken from Vietnam and Malaysia.

From the business leaders interviewed, 72 percent told OBG that they were likely or very likely to make a significant capital investment within the next 12 months.

An even higher share (around 84 percent) of executives surveyed across the six Asean states had positive or very positive expectations for local business conditions over the same timeframe.

In a sign of the key role played by the private sector in generating growth across the bloc, three-quarters of respondents said that government spending accounted for less than 40 percent of business in their respective sectors.

OBG’s findings also confirmed the influence that China continues to exert on the Asean markets, with the highest proportion of respondents (33 percent) citing a slowdown in the Asian giant’s economy as the external factor they believed would have the greatest impact on short-to-medium-term domestic growth.

Trade between China and Asean reached a record level of $514.8 billion in 2017, according to official Chinese figures. China also tops the list of trading partners for all six countries represented in OBG’s survey.

A similar share (31 percent) cited leadership as the attribute most in need across the workforce in their respective markets, followed by engineering (28 percent), and research and development (15 percent), highlighting skills gaps across the region that could hinder competitiveness if left unaddressed.

When it came to transparency, the picture was varied. Almost half (47 percent) of business leaders interviewed described transparency in their market as high or very high relative to the region, while a similar share (41 percent) said it was low or very low.

Responses were similar to a question about tax competitiveness, with half of the respondents referring to their country’s tax environment as either uncompetitive or very uncompetitive on a global scale, while 41 percent said it was competitive or very competitive.

Executives from Vietnam and Myanmar were most negative about business transparency levels, with CEOs from the latter also among the most pessimistic about the domestic tax environment, alongside executives from the Philippines.

CEOs from Vietnam, together with others in Malaysia and Thailand, were more positive about their respective tax environments.

Patrick Cooke, OBG’s regional editor for Asia, said the strong business sentiment and high expectations documented in the inaugural OBG in Asean CEO Survey were in line with the region’s current position as the leading engine of global economic expansion.

Cooke, however, noted external risks could derail Asean’s momentum, particularly as the world’s two biggest economies continue to impose anti-trade measures on one another, whilst China’s growth is expected to moderate somewhat as it focuses on de-risking its financial sector and rebalancing its economy towards consumption-led expansion.

Cooke said survey questions on tax, credit access and transparency inevitably produced mixed responses, reflecting the varying stages of development and economic priorities of the markets surveyed.

“Perhaps what this mixed picture of the business environment demonstrates above all else is that despite ongoing efforts towards the harmonization of certain laws, standards, regulations and practices across the bloc, significant development disparities and competing fiscal regimes remain obstacles to the smooth integration of the Asean Economic Community , which by 2025 aims to create a cohesive single market and production base that promotes ‘shared prosperity’ among all members,” he said.

He added that if the AEC is to succeed in its ambition of creating “a people-centered, outward-looking bloc that is highly integrated in international value chains”, member states will need to make education and skills development a priority, “as the region looks to cultivate a new generation of innovators that can translate ideas into sustainable wealth and job generation against a backdrop of intense global competition and rapid technological change, which will give birth to new industries while sounding the death knell for others.”

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